Kingfisher Airlines has not sought any help from the government and it will now focus on its full fare model, according to Vijay Mallya, Chairman of the airline and of the UB Group, Mr. Mallya said while there would be no lay-off among its 7,000 employees, the airline, with a debt of around Rs 6,500 crore, was looking at cutting costs and taking several steps to face the challenging times.
“We have not applied for any restructuring of debt by banks. They have not formally told us to infuse any equity. What we asked for is to address our working capital needs and to help reduce interest costs.” The lender banks would follow their own processes and appraisal for working capital, but in the last 30 days Rs. 150 crore was infused into the airline.
The viability of the airline was already established, but “there has been a lot of focus on debt although this level is not unusual for an airline of our size. There is a private airline that has double the size of our debt,” he said.
President and CFO of UB Group Ravi Nedungadi said, “The promoters have Rs. 3,593 crore in terms of equity in the airline and the debt is Rs 6,500 crore. Of the equity portion, Rs. 780 crore came in this calendar year.''
Mr. Mallya said, “We will pursue every opportunity to raise capital, but a dilution of stake depends on the price, valuation and the investor. On our part, we are looking at all elements of costs. One of the biggest is interest cost considering that the Reserve Bank of India has revised it multiple times over the last 12 months —from 11 per cent to 14 per cent. We have also applied to the Ministry of Commerce for direct import of jet fuel. If we import directly for our own consumption, we do not pay sales tax. Fuel costs account for more than half of our operating costs, and the ad valorem tax by State governments on top of the high fuel prices have ensured that the State governments are enjoying windfall profits at the cost of the aviation industry.”
On the airline's outstanding dues to oil companies, he said, “We have fully repaid the Indian Oil Corporation and Bharat Petroleum. As far as the Hindustan Petroleum is concerned, from a level of Rs. 600 crore of unsecured credit, we have given bank guarantees and our outstanding is down to Rs. 40 crore.''
Mr. Mallya fully endorsed foreign direct investment (FDI) in aviation, saying: “I am an avid supporter of it and there is no reason why FDI from a strategic partner [airline] should be banned. ''
